Instituele omgeving

- Provide examples of technological disruptions in air transport and explain their impact on the air
transport market.
- Name the most important international institutions in relation to air transport and explain their
function.
- Explain the main challenges in the air transport sector.

Technological disruption

- 1941 General Henry H. Arnold  leered vliegen door de gebroeders Wright

- End of the 1950s: Boeing 707  long distance jet
- Early 1970s: Boeing 747  mass transport
- Mid- 1990s: Boeing 777  fuel efficient ETOPS (Extended range – Twin engine Operational
performance Standards)
- Mid-2000: Airbus 380  cost per seat mile reduction
- Recent: Airbus 350XWB and Boeing 787  fuel efficiency and ultra-haul range
- Recent: A321LR and 737MAX  long haul on thin routes with a narrow body possible

Geo-political disruption

1978: Airline Deregulation Act:

o Changed the airline industry by removing government control over fares, routes, and market
entry for airlines.
 Increased competition
 Impact on airline consolidation  allowed entry of new carriers
 Focus on efficiency and innovation  improved airline technology.
o American airline “Big Bang”
deregulation in Europe

Treaty of Rome (1959)

This was basically the formation of the European Union which created a transport policy, except for air
and maritime transport.
o This created structural problems:
 Airlines were owned by national governments.
 Countries issued permits for government-owned airlines.
 Bilateral agreements (agreements between two states or entities).
 International routes could only be served by one airline from each country.
 Capacity was usually split 50/50 between the airlines of the countries involved.
 Income was split 50/50 between the airlines.

Structural problems in Europe

o Prices were set bilaterally by airlines, under government control.
o Airlines received subsidies.
o Charter flights for leisure traffic were arranged by bilateral agreements.

Nouvelles Frontières: April 1986

o Well known for revolutionizing the travel industry in France by popularizing package
holidays and making travel more accessible to the general public.
- Consequence: liberalization in three packages in 1988, 1990 and 1993: no “Big Bang”.

First package (01.01.1988)  focus on EU competition

o Limited impact
o Application of EU competition law
 Allowed EU airlines to be owned and controlled by nationals of any EU member
state, thereby promoting cross-border investments and ownership.
 Set their own fares and negotiate freely with customers, no more regulated prices.
 Greater flexibility in route selection and scheduling

Second package (01.01.1990)  focus on free tariffs

o Further liberalization of the first package (tariff liberalization and market acces
 Foster fair competition among airlines
 Slot allocation: more transparent and efficient system for allocating airport slots,
ensuring fair access to airport infrastructure for all airlines.
 Facilitated codeshare agreements between airlines: allow carriers to collaborate and
offer more comprehensive networks to passengers.

Third package (01.01.1993)  focus on market acces

o Bilateral system replaced with multilateral system.
o Limitation regarding cabotage (cabotage = the right of a foreign transport operator to operate
within the domestic borders of another country in context of transportation )
o Harmonization of AOC’s (Air Operator certificate: requirement related to safety, maintenance,
training, and operational standards)
o From April 1997 onwards: single European aviation market – full deregulation

Open skies agreement with the USA (2008)

o Removing regulatory barriers that had previously restricted airline operations between the
two regions.
4 levels of European deregulation

1. Competition
2. Tariffs
3. Market access
4. AOC

Freedoms of the air

Impact of the deregulation

- More competition
- More supply
- Lower yields
- Traffic growth
- Improvements in “productive efficiency”
- Gains in “consumptive efficiency”

Impact: increased competition

- New airlines enter the market: RayanAir (1985), EasyJet (1995), Virgin Express (1996), Buzz (2000)
Impact: more supply and lower yields

Impact on tariffs
a. More promotional tariffs, but higher tariffs for fully flexible tickets
b. Large differences In prices/ km in Europe
c. Birth of low-cost airlines, business model of Southwest Airlines

Impact on market acces

d. Strong increase in the number of market players
e. Increased pressure on infrastructure
f. Today on several routes still limited number of operators (due to the disappearance of
newcomers)

Impact on competition
g. Application of the EU competition policy
h. Subsidies: “one-time, last time” principle

Airline Operation Certificates

i. Deregulation allowed low-cost (LCC) and other airlines too enter the market.

Consolidation (M&A / JV) and bankruptcies

j. KLM/ Northwest first transatlantic JV (1991)

Consolidation in Europe

International Airlines group (IAG)

- Merger of British Airways and Iberia
- Aer Lingus
- …
Lufthansa Group
- Swiss International Air Lines
- Austrian Airlines
- Brussels Airlines
- …
Rayanair Holdings
- Buzz
- laudaMotion
- …
Easyjet
LaudaMotion
Airfrance KLM

Developments after the deregulation

European Aviation Safety Agency (EASA)

Responsible for civil aviation safety. They promote and maintain high levels of safety and environmental
protection in civil aviation within the EU and cooperates with partner countries worldwide.
Single European Sky (SES)
Ambitious initiative launched by the European Union to reform and harmonize the management of European
airspace. It aims to enhance the efficiency, capacity, safety, and environmental sustainability.
European Common Aviation Area (ECAA)
Aims to create a single market for aviation services among participating countries. It was established to
promote liberalization, competition, and harmonization if aviation regulations within the European region
and beyond.
Open-Sky agreements
To promote fair competition between countries, increase consumer choice and stimulate growth in the
aviation sector by removing restrictions on international air services.

Wrap up: legislative disreptions

• Deregulation in the USA (1978), EU (1997) and Open
Skies EU-USA (2008)
• Bankruptcies, mergers and joint-ventures
• New entrants in US: Spirit, Frontier, Jet-Blue
• New entrants in EU: Ryanair, Easyjet, Wizzair
• Low-cost business model
• Huge price reductions and capacity increases
• Deregulation started step-by-step for ASEAN countries – removal of capacity and price barrier
on bilateral agreements. More to come…
• Risk of becoming market distorting oligopoly in US, maybe also in EU

International institutions
Intergovernmental organizations
- International Civil Aviation Organization (ICAO)
- World Customs Organization (WCO)

Sector federations and trade organizations.

International Chamber of Commerce (ICC)
o Doel: stimulate international ondernemerschap.
o Forum waar bedrijven elkaar ontmoeten
o Lobby ter promotie & vereenvoudigen van handel
o Opstellen van procedures (bv. incoterms)
o Arbitrage hof voor internationale handelsdisputen
International Air Transport Association (IATA)
o Handelsorganisatie voor luchtvaartindustrie
o Lobby bij ICAO ea
o Uitschrijven en omzetten van procedures en standaarden
 IATA airline en airport codes
 IATA Dangerous Goods Regulations
 IATA Perishable Manual
o Cargo Accounts Settlement System (CASS)
International Federation of Freight Forwarders (FIATA)
International Air Cargo Association (TIACA)

Challenges for the future

Lage rendabiliteit
Fluctuerende brandstofprijzen

Milieuproblematiek

Congestie

Nieuwe technologieën op komst

Unmanned Aviation Vehicles (UAV)
For possible cargo deliveries, aircraft inspection and maintenance, surveillance and security, search and
rescue operations…

Sustainable Aviation Fuels (SAFs)

Alternative fuel used in aviation that are considered more environmentally friendly. They are produced from
renewable and sustainable feedstocks such as biomass, waste oils, agricultural residues, or non-food crops. It
aims to reduce greenhouse gas emissions and mitigate the environmental impact of aviation.
New propulsion technologies and new aircraft concepts

Luchthavens
- Know the different Belgian airports and their importance for the Belgian economy.
- Can explain how an airport works.
- Can identify the factors that contribute to the competitiveness of an airport.
- Can explain the cargo strategy of Brussels Airport

Categorization of airports
Airport vs. airfield
Airport is a complex that consists of runways, taxiways, aprons, terminals, and other facilities for the
takeoff, landing, and maintenance of civil and military aircraft. Airports are generally larger and more
organized facilities equipped to handle commercial air traffic.

Used for major hubs for air transportation, accommodating scheduled flights, passenger terminals, cargo
operations, customs services, and other aviation-related activities.

Airfields are simpler facilities that includes one or more runways but may have limited or basic
infrastructure. Airfields are often smaller that airports and can serve various purposes, including private
aviation, military operations, or emergency landings.

Ranging from supporting local aviation needs (private planes, flight training) to military operations or
emergency services.

The difference lies in the scale of operations, infrastructure and the range of services provided.
Civil vs. military airports

Hub airport vs. regional airport

Hub airports are a central or major airport that serves as a focal point for airline operations, connecting
various destinations within a broader air travel network. They are strategically located and operated by
major airlines to facilitate efficient transfer of passenger and cargo between flights. They play a critical role
in airline route networks and schedule planning.

Regional airports are typically a smaller airport that primarily serves local communities, neaby cities, and
regional air travel needs. They play an important role in supporting general aviations, commuter flights, and
connecting smaller cities to larger hub airports.

Airports for national and international traffic

Cargo vs. passenger vs. mixed airports

Classification in function of technical features and equipment

Output of European airports (2019)

Airports in Belgium

Brussels Airport
Focus:
 - Passenger
- Cargo

Economic impact:
- 35.081 FTE (Full-Time Equivalent)
- 3.416,7 million euro added value.

Makes most money of parking.

Liège Airport
Focus:
- Cargo (biggest one in BE)
- Leisure passengers

Economic impact:
- 5968 FTE
- 530,9 million euro added value.

Brussels South – Charleroi Airport

Focus:
- LCC passengers (Low-Cost Carrier)

Economic impact:
- 2.728 FTE
- 202,2 million euro added value.

Ostend – Bruges Airport

Focus:
- Leisure passengers (traveler
for recreational or holiday
purposes)
- Cargo flights
- Training flights

Economic impact:
- 633 FTE
 - 37,1 million euro added value.

Antwerp Airport
Focus:
- Business and leisure passengers
- Training flights

Economic impacts:
- 1090 FTE
- 85,2 million euro added value

Airport Kortrijk – Wevelgem

Focus:
- Business passengers
- Training flights

Economic impact:
- 235 FTE
- 16,5 million euro added value.
Belgian airport vision

Jurisdiction over air transport in Belgium

Federal government
- Regulation and certification for civil aviation (DGLV  Directoraat-Generaal LuchtVaart)
- Air Traffic Management in Belgian airspace (Skeyes)
- Exploitation of Brussels Airport (Brussels Airport Company)

Regional governments
- Infrastructure and exploitation or regional airports (LEM-LOM 
LuchthavenOntwikkelingsMaatschappij)
- Spatial planning and environmental permits

Belgian vision on air transport

Brussels Airport vision
Shift 2027
- Performing better as a hub
- Diversifying the activities
o Better their cargo and logistics
o Focusing on real estate
- Embedding sustainability
o Net Zero Carbon by 2050
 Stargate project
 Sustainable aviation fuel
 Artificial Intelligence

Strategic Vision 2040

The next 20 years there will be an increase in passenger flight of 3,8%. Belgian Airports will have to invest
in their infrastructures. Next to that, a forum was launched where parties can discuss development for their
airports.

Wallonian vision on regional airports

- Regional airports as a catalysator for employment and added value in the region
- Liège airport: European hub for air cargo
- Charleroi airport: Major European LCC airport
- Infrastructure: SOWAER (Société Walonne des Aéroports) s.a.
- Exploitation: Charleroi Airport s.a. and Liège Airport s.a.

Flemish vision on regional airports

Sustainable growth within current environmental permit

Antwerp Airport
Focus on scheduled flights and GA-activities.
Ostend-Bruges Airport
Focus on passenger flights and (local) cargo market.

Airport Kortrijk-Wevelgem
Develop as a GA-airport with controlled airspace.

6 Flemish policy choices for air transport

1. Sustainable development (green airports concept)

o Diversification of airport charges
o Mandatory addition of SAF
o Stimulating electric flying
o Use of sustainable energy at the airport
o Optimize spatial planning to reduce noise impact

2. Optimizing revenues from airport operations

3. Optimizing cost structures

4. Strategic cooperation with BRU and airfields

5. Dialogue with the stakeholders

6. Investing in drone development

Airport competition and competitiveness

Competition between airports

Airport competitiveness

Territory
- Location
o Central within airline network
o Optimal location = f(market)
- OD demand
o Close to economic activity
o Less competition for O-D
(original destination demand)
o Airport capacity
 Availability of slots
 Availability of ground
capacity

Cargo market place

- Presence of forwarders (IATA Cargo Agents)
o Architects of transport
o Combine different small shipments into larger consignments.
o Needed to fill up empty belly space.

- Presence of integrators
o Fully integrated logistics service providers (door-to-door)
o Bring volume to the airport and volume lead to scale economies.

- Presence of wide-body capacity

o Belly capacity can be used at marginal cost
o Belly capacity can be offered at high frequency
o Wide-body flights can feed full freighter operations

- Presence of full freighter capacity

o Can offer routes not served by passenger aircraft
o Can transport goods which cannot be transported on pax aircraft

Wide body aircraft narrow body aircraft

Airport operations
- Operating hours
o Importance of night-time operations for cargo

- Airport costs
o Aeronautical and non-aeronautical airport charges
 Aeronautical charges:
 Landing fees
 Parking fees
 Terminal fees
 Passenger fees
 Aircraft fees
 Fuel concession fees
 Air traffic control charger
 Non-aeronautical charges:
 Retail and concession revenues: income restaurants, retail shops…
 Car parking fees
 Rental and real estate income
  Advertising and sponsorship revenues
 Hotel and conference center income
 Ground transportation services
 VIP services
o Total costs of operations more important than airport charges

Actors influencing the total ops cost

o Handling agents/ handlers
o General sales and service agents (GSSA’s)
o Security companies
o Brokers
o …

- Airport connectivity – Network

o High frequency connections are important to attract transshipment

- Airport accessibility
o Air freight transport is by definition multimodal
o Road haulage is crucial for integrators

Product differentiation

- Airport reputation
o Quality of e.g. ground handling services
o Customs efficiency
o Experience with handling freighters and high value goods

- Airport marketing and business development

- Specialized cargo supra-structure

Air Cargo Belgium

3 clusters: forwarder, GHA (ground handling agent, Airline)

9 steering groups:
- Digitalization
- Operational excellence
- Customs
- HR
- Innovation and sustainability
- Pharma
- Fresh (perishables)
- Live animals
- E-commerce
Government actors at BRU

Brussels Airport Company and Brucargo

- Cargo team
o Director Cargo & Logistics
o Head of product & Network development

Luchtvaartmaatschappijen
- Can explain the main economic concepts of airlines.
- Can explain the relation between passengers and cargo in air transport and why cargo is important
for combination carriers.
- Can explain the role and function of integrators.

Economic characteristics of the airline business

Some observations
An airline has some specific features.
- Network = fixed costs at short term (1 season)
 - Short term difficult to change network/ cost structure.
- Revenues are only lever to impact P&L (Profit & Loss) on the short term.
- Cash before expenses time lag make airlines generally ‘cash rich’

Influenceable factors
Cost factors:
Staff costs Distribution
Aircraft leasing / purchasing Marketing and sales
Airport handling Cabin configuration
Catering Fleet composition
maintenance network

Revenue factors
Air fare structure
Off board ancillary revenues
On boars ancillary revenues

Demand for air transport – price elasticity

Quid economies of scale, scope, density

Aircraft Operating Costs decrease
- Larger aircraft
- More distance flown
- Higher load factor

Larger airlines benefit from

- Economies of scale (indirect costs, purchasing benefits…)
- Economies of scope (cargo, ancillary revenues…)
- Economies of density (network effects)
Air cargo alliances

Importance of air cargo for combination carriers

Passengers vs. cargo

Passengers (RPKs) Cargo (CTKs)

Demand vs. supply

Demand (CTKs) Supply (ACTKs)

Air cargo strategies of non-integrated carriers

Cargo strategies

Integrators

Integrators are vertically integrated express companies that provide time-definite, door-to-door services and,
for that purpose, perform their own pick-up and delivery services, operate their own fleet of aircraft and
trucks and tie it all together with advanced information and communication technologies. Examples: FedEx,
UPS, DHL

Emergence of the integrators

- ‘60s: °Air express services in the US
- 1973: Creation of FedEX, pioneer in air express industry.
o Example was followed by others
 emergence of integrators
- 1978: deregulation of US air transport market
- 1990: Role of the internet
o E-commerce/decreasing demand for mail and document services
 o Entry of integrators in more diverse markets: direct competition with non-integrated service
providers

Integrators vs. non-integrators

Integrators are competing in 3 industries

The big three

- FedEx: origins in US domestic AIR express
- UPS: origins in US domestic ROAD express
- DHL: origins in Australian ROAD express

FedEx and UPS have centralized culture and stable management.

DHL: decentralized culture, instability in management

Organisational structure and service portfolio

• UPS and DHL: one-stop-shopping providers with broadest service portfolio (air & ground express
transport + logistics & supply chain management + freight forwarding, incl. ocean freight)
• FedEx: stronger focus on transport and transport-related value-added services
• Air express operations: UPS has more restrictions regarding weight/domensions of shipments.
Express delivery cycle DHL

DHL hub system

Challenges and opportunities for integrators

- Increasing network density (economies of density)
- Capacity shortages and night curfews at big airports

- Large use of trucking (intra-European)

 - Point-to-point between sub hubs if enough demand
- Express via rail?

Luchtvrachtproces
- De basisprocessen van de suply chain rond luchtvracht uitleggen
-

Luchtvrachtgoederen
- De verschillende productcategorieën in de luchtvracht onderscheiden
- De specifieke behandelingsvereisten en reglementering rond het vervoer van de verschillende
productcategorieën benoemen

Dangerous Goods

Definition:
Articles or substances which can pose a risk to health, safety, property or the environment.

ICAO: Annex 18 deals with the "Safe Transport of Dangerous Goods by Air". In general it sets
down broad principles but one of the Standards requires that dangerous goods are carried in
accordance with the Technical Instructions for the Safe Transport of Dangerous Goods by Air (the
“Technical Instructions”).

IATA: dangerous goods regulations

Class 1.  explosives

Class 2.  gases
1. Flammable gas
2. Nonflammable, non-toxic gas
3. Toxic gas

Class 3.  flammable liquids

Class 4.  flammable solids

1. Flammable solids
2. Substances liable to spontaneous combustion
 3. Substances which in contact with water emit flammable gases

Class 5.  oxidizers and organic peroxides

1. Oxidizers
2. Organic peroxides

Class 6. Toxic substances & infectious substances

1. Toxic substances
2. Infectious substances

Class 7.  radioactive materials

Class 8.  corrosives

Class 9.  miscellaneous (a mix of things)

Hidden dangerous goods.

- Shipper is responsible to declare goods as dangerous.
- Status checked by airline, forwarder, and GHA (ground handling agent)
- Wrong classification of goods has legal consequences.
- Hidden dangerous goods real problem today: importance of training staff

Packaging
- Packaging groups:
o PG I  substances presenting high danger
o PG II  Materials that destroy full thickness of intact skin tissue within 14 days of
exposure, lasting at least 3 minutes but less than 60 minutes.
 o PG III substances presenting low danger

Labeling

Handling labels

Package labeling example: